Page 314 - Handbook of Energy Engineering Calculations

where η is the boiler efficiency for a fossil fuel system which supplies
equivalent heat. Referring to the tabulation, the value of F is tabulated at
various market discount rates for η values of 70, 80, and 100 percent. The
rate of return for the solar installation is that value of R at which F = S. For η
= 70 percent, R is between 7.5 and 8.0 percent. For η = 80 percent, R is

between 6.5 and 7.0 percent. These rates of return should exceed current
interest (discount) rates to attain economic feasibility.

5. Compute the after-tax present value (PV) of the solar investment if the
existing boiler installation has an efficiency of 70 percent

In order to have a positive value of PV, F must exceed S. Therefore, select a

market discount rate (R) from the tabulation which satisfies this criterion. For
example, at a 5 percent discount rate,

Note that at 8 percent or higher PV will be negative and the investment

proves uneconomical against other investment options.